Former New York Gov. Eliot Spitzer called for the reinstatement of the Glass-Steagall Act, the Depression-era legislation separating commercial banks from investment banking, during a breakfast meeting of New York City’s Real Estate Principals Group on Tuesday morning.
The Glass-Steagall Act was repealed in late 1999. Economist Robert Kuttner and others have criticized the repeal of the 1933 banking legislation, suggesting that it was a major factor in the devastating 2007 subprime mortgage crisis
In his remarks calling for stronger financial regulation, Spitzer warned that history could repeat itself.
“Everybody had all the power they needed in the run-up to the bubble to intercede, they just chose not to do it,” said Spitzer, who resigned as governor four years ago in the wake of a prostitution scandal. “There’s always the self-delusion that this time we’re smarter.”
“The same people who created the crisis are supposed to keep us out of the next one,” the politician-turned-pundit added mockingly.
“Banking should be boring,” said Spitzer. “When banking isn’t boring, bad things happen.”
Spitzer, 53, also criticized the architects of the 2008 bailout for “the socialization of risk and the privatization of gain.”
Spitzer originally came out in favor of Glass-Steagall earlier this year during an interview with WirtschaftsWoche, a German financial newspaper, telling the weekly paper that without strong financial regulation the mega-financial firms — the companies deemed too-big-to-fail — “will get us in trouble again” and will eventually be looking for another taxpayer-funded bailout.
“In my view it would be better to go back to the system of bank separation, as we had with relative stability in the fifty years prior to the repeal of Glass-Steagall,” said Spitzer.